Suppose household annual demand for gasoline follows the equation QD = 2000 – 500P + 25I where P is the price of a gallon of gasoline and I is household income in 1000s of dollars. Suppose that P = 3 and I = 60. What quantity of gasoline will households demand at this price and income level? __________ What is the income elasticity of demand for gasoline at this price, income, and quantity level? __________ What happens to the income elasticity of gasoline demand if I rises from 60 to 100? It _____________ (rises/falls) to ______________. Does this change in elasticity make gasoline buying more or less sensitive to income changes?
Suppose household annual demand for gasoline follows the equation QD = 2000 – 500P + 25I where P is the price of a gallon of gasoline and I is household income in 1000s of dollars. Suppose that P = 3 and I = 60. What quantity of gasoline will households demand at this price and income level? __________ What is the income elasticity of demand for gasoline at this price, income, and quantity level? __________ What happens to the income elasticity of gasoline demand if I rises from 60 to 100? It _____________ (rises/falls) to ______________. Does this change in elasticity make gasoline buying more or less sensitive to income changes?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Suppose household annual demand for gasoline follows the equation
QD = 2000 – 500P + 25I
where P is the price of a gallon of gasoline and I is household income in 1000s of dollars.
Suppose that P = 3 and I = 60.
What quantity of gasoline will households demand at this price and income level?
__________
What is the income
__________
What happens to the income elasticity of gasoline demand if I rises from 60 to 100?
It _____________ (rises/falls) to ______________.
Does this change in elasticity make gasoline buying more or less sensitive to income changes?
__________
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